Noble Midstream Could Grow Its Distributions By 20% Annually Through 2020

Mentioning that Noble Midstream Partners LP (NYSE: NBLX) was almost exclusively dependent on its general partner for oil and gas production, Citi’s Faisel Khan stated that the company would grow its distributions by 20 percent per annum through 2020.

Khan initiated coverage of the company with a Buy rating and price target of $33.50.

Estimates

The analyst estimates that Noble Midstream Partners’ distributions would grow from an annualized rate of $1.50 per unit at present to $2.60 in 2020 organically, even in the absence of dropdowns.

Khan also expects the company to sustain a coverage ratio of 1.3x to 1.5x.

Related Link: Noble Midstream Boasts An Impressive Record Of Stability And Strength

“We estimate the organic buildout at NBLX will be highly accretive to NBLX unitholders given the roughly 4x buildto-EBITDA multiple,” the analyst stated, while adding that under this scenario, the company was expected to issue no equity through 2020.

The remaining funding was expected come from debt, which Khan estimates would rise from zero at present to $130 million in 2020.

Impact Of Noble Energy

There could be upside to the estimates if Noble Energy, Inc. (NYSE: NBL) Noble Midstream Partners’ general partner, drops down assets at an accretive valuation.

“We believe the biggest risk to NBLX unitholders is its exposure to NBL's production growth. Our sensitivity analysis suggests if NBL adds one more rig in the DJ Basin, our valuation would increase by almost 10 percent,” the analyst added.

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